New Hampshire is giving payday lenders the gong as it rings in the
new year. A law that takes effect today caps the interest rate on small
loans at 36 percent a year, which the industry has said will put it out of
business.
1.6. EXERCISES 15
Payday lenders typically charge $20 per $100 for two-week loans backed
by the borrower’s car title or next paycheck. That amounts to 1.43 percent
interest per day, an annual rate of 521 percent.
The cap translates to a daily interest rate of about 0.1 percent, or total
interest charges of $1.38 — a dime a day — on a $100, two-week loan.
If a person takes a payday loan for $1,000 for 2 weeks, how much will they save in interest with the new cap ?
1 answer